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USD/JPY assessment


Fernando Palmer
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Hi Fernando, thanks for the question.

USD/JPY broke out higher yesterday after days and weeks of trying to do so. The breakout came after the Bank of Japan (BoJ) scheduled an extraordinary meeting to discuss new measures to support the troubled economy. The new stimulus plan means more money printing, which then translates into the weaker currency. 

According to the reports, the Bank is looking to set up a new private-public fund to inject cash into the small to medium-sized enterprises (SMEs). The fund has a budget of more than $450 million to target businesses in the manufacturing, services and other industries that have great importance for the Japanese economy. 

As a result, the Yen weakened on reports of the new stimulus. USD/JPY, therefore, broke above $107.50 resistance to trade above $108 again. However, the buyers failed to sustain the gains and the price action rotated lower. I see the USD/JPY trading in a range in the coming days.  


 

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Hi Fernando, thanks for the question. 

Your question was obviously posted earlier, but I believe now is a good time to discuss USD/JPY again. Today, the U.S. equity market dropped sharply lower in the risk-off environment. It seems that the number of coronavirus cases increased in some U.S. states that are reopening up from lockdowns, as well as European countries.

Of course, investors tend to focus on safe-haven assets in times of global uncertainties. For this reason, the Japanese Yen is a popular destination, as well as gold. 

In general, when the stock market rises it translates into a risk-on environment, while on the other hand, a drop in the stock market equals a risk-off environment. That's because investors want to avoid risk and are averse to it.

“The sense is maybe the market got ahead of itself, which makes sense given the fact that we’ve come so far so fast. The reality is this thing’s going to linger longer than probably the market had through of,” said Dan Deming, managing director at KKM Financial.

USD/JPY is on its way to close 0.25% lower and increase weekly losses to 2.5%. The pair struggled to break above the strong resistance on the weekly chart, located near $110, and in the context of the 100-WMA and 200-WMA. 

As a result, USD/JPY dropped 300 pips on general dollar weakness, and the increasing concerns of the second wave of COVID-19. The price action has now moved below the resistance/support on the daily chart as well, around the $108.50.


 

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Hi Fernando,

USD/JPY remained almost unchanged in response to the Bank of Japan's recent decision not to touch the monetary policy tools. 

The BOJ decided to keep the 10-year government bond yield target at 0.00% and retained the policy balance rate at -0.10%, as anticipated. As a result, there is very little interest among investors to buy JPY right now. 

Additionally, the Japanese Yen will likely face selling pressure due to growing stock markets. The futures on S&P 500 reportedly advanced 0.75%, probably because of successful results in the coronavirus vaccine safety trial.
 

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Hello Fernando,

The Japanese Yen benefited from the rising tensions between the United States and China.

The Japanese currency reached a one-month high while the euro experienced a slowdown as traders observed the flash Purchasing Managers’ Index (PMI) hit a 25-month high.

Euro remained unchanged, and while the USD didn’t look much appealing recently, the Japanese yen took the opportunity and advanced.

According to latest data, the JPY jumped 0.6% to 106.25 JPY=EBS, its highest mark since June 23, after the Chinese government ordered to shut down the U.S. consulate in Chengdu, after Washington closed the Chinese consulate in Houston.

“The yen has benefitted more broadly overnight by more evidence of rising geopolitical tensions between China and the West. It has been reported that China has ordered the US to close its consulate in the southwestern city of Chengdu in retaliation for the US decision to close the Chinese consulate in Houston.”
 

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